Once you have learned to read the cash flow statement you can apply few tricks to improve the cash flow.
LET’S TAKE A LOOK!
1. Maintain your books up to date
If you own a business where cash flow is critical, it is essential to have a strong accounting system and maintain it as up-to-date as possible. The good news is that having a solid accounting system is not difficult. We provide a service that will give you updates about your cash flow status. We will take care of the entire procedure for you at a fair fare, lower than the average accounting company.
2. Send out invoices as soon as possible
Keep track of your receivables by sending out invoices on time and clear payment deadlines. Make sure to follow up on outstanding bills as soon as possible to assist keep the income flowing.
It is also important to ensure that the payment instructions on your invoices are easy to read. Include a visible payment due date as well as a detailed list of products and services so your client knows exactly what they are paying for it.
3. Expand payment options and provide discounts
By giving discounts for early payment, you can reward your best clients while also managing your cash flow. This allows you to show your gratitude for the positive relationships you’ve created with regular customers while also encouraging them to pay on time in the future.
4. Inventory management
It is essential for businesses to be able to satisfy consumer needs promptly but having too much inventory on hand comes with a cost. Aside from limiting cash flow, it also generates storage and maintenance expenses, as well as the risk of losing value when new models replace older ones. It is essential to evaluate your inventory on hand on a frequent basis in order to optimize it. We adopt software that will assist you in making the right decisions, and if your inventory is complicated, a scan and track system may be the best option to have your inventory updated in real-time.
5. Use supplier discounts to your benefit
Like you, even the suppliers are typically keen to collect their receivables as quickly as possible. For that purpose, many of them provide discounts for early payment. If you noticed that your business cash flow is poor, you should request your supplier to extend the due date of your invoices, this will give you room to breathe. There may be an additional administrative cost, but it may be worthwhile to ensure that you have enough cash on hand to pay your other responsibilities.
6. Increase your prices
A company owner should review the business rates on a frequent basis to ensure that they are covering their costs and on target to earn a profit. It is typical in the early phases of a business to lack sufficient data to determine appropriate pricing. In reality, many businesses would offer a low price to attract consumers and verify their product early on. Therefore, after a company has gained a certain level of traction, it is possible to raise pricing, which is the most straightforward approach to boost profits.
7. Existing contracts should be reviewed to save money
Cutting costs is probably the most common method for a small business to increase its cash flow and profitability. Any business has a range of costs that add up over time. It is a good idea to keep track of your costs on a regular basis to verify that you are still utilizing them and that they are bringing value to your organization. Several businesses start to utilize a system that helps to negotiate existing contracts, for example, phone or internet expenses.
8. Owner salary reduce or deferred
One of the most straightforward strategies to free up cash flow in the near term is to cut or eliminate your income as a business owner. Please note that owner wages are a fundamental and necessary expense of the business, so it makes sense to pay yourself a salary and then reinvest it into the company to address any cash flow deficits, depending on the tax implications. Hopefully, this is just a temporary solution.
9. Create a credit line
A business line of credit is a simple way to help boost cash flow if you don’t already have one. If your company is registered and you’ve been paying your bills and invoices on time, you could be able to acquire a line of credit for your company that would provide a rapid cash injection. It is important to do some research to figure out which credit line is ideal for you and has the lowest interest rate. What you need to consider are the costs, the monthly payback rate, and a secured or unsecured credit line.
10. Make a monthly (or weekly) budget
Calculating your income and costs, as well as the related cash flow is one of the most important tools for small businesses owners to comprehend how much they can spend and how much they really need. Budgets don’t have to be extremely complicated or even accurate, they’re just projections that help to figure out when cash flow will occur. It’s necessary to keep it up to date when conditions change.
It can be difficult to manage your cash flow, especially if your company is expanding. It’s stressful to find yourself as an owner struggling for cash flow and/or extended credit while having a successful business. This is primarily due to business cycles, in which client payments are frequently received after ongoing orders have to be paid. As a result, it’s essential to have measures in place to deal with these concerns as they emerge.
Contact us today to do an overview of your cash flow statement and to provide insights on how to improve your business cash flow.
